CANADIAN CONSTRUCTION

- Indicators of Growth, Composition and Changes

Recent data on the Canadian Construction Industry performance indicators provide insights into resilience of the industry, overall construction price trends, and the industry’s response to housing supply concerns in Canada.

Construction Industry GDP and Investments

Despite economy-related concerns, the construction industry in Canada is showing signs of promise in the first quarter of 2023. A relative year-over-year increase of 0.6% in GDP indicates a positive outlook for the industry. According to Stats Canada, the construction sector expanded by 0.3% in February, marking the second consecutive increase at the beginning of the year, following a decline in the last five months of 2022.

However, data shows some concerns about investments in residential construction within the industry. Investment in residential construction decreased by 0.5% over the past year and has experienced only a slight increase of 1% from the previous month. Nonetheless, non-residential construction saw a yearly increase of 10%. Statistics Canada attributes this growth to the 15th consecutive monthly increase in industrial construction investment, excluding Newfoundland and Labrador.

Overall, Canada’s construction industry is making positive strides, particularly in non-residential construction. These trends and statistics demonstrate the resilience and adaptability of the construction industry, and it will be interesting to monitor its progress as the year continues amid the looming recession.

Housing Starts

The housing starts trend in 2023 started on a downward trajectory at the beginning of the year, experiencing a decline of 3% in the first quarter compared to the previous year and decrease of 31% from the last quarter. This decline indicates a correlation between investment in residential construction and housing starts in Canada, as both data points show a year-over-year decline. It is worth noting that housing starts in the first quarter are typically lower than the second, third, and last quarters each year.

According to the Canada Mortgage and Housing Corporation (CMHC), among the three major metropolitan cities - Vancouver, Toronto, and Montréal - only Vancouver recorded an increase in the total seasonally adjusted annual rate of housing starts in March, with a notable 98% rise due to more than twice as many multi-units starts compared to February. Conversely, Montréal and Toronto experienced 12% and 26% declines, respectively.

The decline in housing starts reflects a lack of effective response to the pressing need for increased housing supply to address the housing affordability issue in the country. It is clear that it will take time for the housing supply to catch up with the continuously growing population in Canada. That said, the implications of this situation for the construction industry are uncertain, and only time will reveal the outcome.

Building Construction Price Index

In the first quarter of 2023, construction prices for residential and non-residential construction in the 11-city index experienced yearover-year increases of 11.1% and 9.6%, respectively; however, compared to the previous quarter, there was a relative increase of 1.8% and 1.7% in residential and non-residential building construction costs.

Toronto led the residential construction price index chart with a score of 188.5, marking a significant increase of 17.7% from Q1 2022. Calgary and Ottawa followed closely with indices of 174.8 and 173.1, respectively, experiencing a relative increase of 6% from the previous year. The construction cost upsurge in Calgary and Edmonton seems to be gradually stabilizing, with a decrease in the year-over-year increase from around 7% in Q1 2022 to 6% in Q1 2023 and a slight decline in the construction price index by -0.4% in the last quarter. However, Toronto’s residential construction prices have noticeably surged in the first quarter of 2023, attracting significant attention. According to Stats Canada, construction costs for residential buildings increased the most in Toronto (+3.2%) in the last quarter.

Generally, the residential construction price index was higher than the non-residential construction price index, except in Montreal and Moncton, whereas the most significant increases in non-residential construction costs were in Ottawa, Toronto, Montreal, and Moncton. Notably, Moncton had the highest year-over-year increase of 14.2%, bringing its non-residential construction price index closer to residential construction. In the last quarter alone, Vancouver and Moncton saw a 2.3% increase in non-residential construction costs.

These trends indicate that construction prices are rising in residential and non-residential sectors, with certain cities experiencing significant increases.

Employment in the Canadian Construction Industry

As of April 2023, the employment composition within the construction industry continues to display a significant gender gap. The workforce remains predominantly male, with males accounting for 86% of the industry’s employment. This stark contrast highlights the ongoing imbalance in gender representation within the construction sector. In comparison, the distribution of the total working population in Canada shows a more even split between genders.

*Based on available data from Statistics Canada as on May 10, 2023, as follows:

1. Growth in Construction Industry Gross Domestic Product (GDP), as at Feb 2023: Statistics Canada. Table 36-10-0434-01 Gross domestic product (GDP) at basic prices, by industry, monthly (x 1,000,000)

2. Composition & Changes in Investments in Construction, as at Feb 2023: Statistics Canada. Table 34-10-0175-01 Investment in Building Construction

3. Construction Price Index Across Metropolises, as at Q1 2023: Statistics Canada. Table 18-10-0276-01 Building construction price indexes, by type of building

4. Housing Starts Composition, as at Q1 2023 (Residential Construction): Statistics Canada. Table 34-10-0135-01 Canada Mortgage and Housing Corporation, housing starts, under construction and completions, all areas, quarterly

5. Changes in Housing Starts, as at Q1 2023: Statistics Canada. Table 34-10-0135-01 Canada Mortgage and Housing Corporation, housing starts, under construction and completions, all areas, quarterly

6. Composition of Employment in All Industries Vs Construction, as at April 2023: Statistics Canada. Table 14-10-0022-01 Labour force characteristics by industry, monthly, unadjusted for seasonality (x 1,000)

About the Author

Ajibola Soboyejo, MSc, MRICS, PQS Senior Consultant, Altus Group Ajibola is a professional quantity surveyor specializing in cost planning, design economics, BIM estimating, cost control, and project management. Ajibola possesses both Master’s and Bachelor’s degrees in Quantity Surveying and has worked on series of commercial real estate projects in Nigeria and Canada.

Udayan Chatterjee, B.Tech, PMP, MRICS, PMI-SP Associate Director, Contracts & Commercial, Lakeland Consulting Inc. Udayan is a commercial and project management professional with expertise in quantum assessment, schedule forensics, contract and claims management. He holds a Bachelor’s degree in Electrical Engineering and has worked on various large scale transportation, mining and commercial construction projects across Canada and India.